WeWork’s problems cause concerns for landlords regarding office space

In the last five years, the shared office space provider WeWork had seen breakneck expansion, with properties on New York’s Fifth Avenue to the dominating building One Poultry in London. However, whilst it has been sweeping the group space at a staggering rate since first opening its first location in Manhattan, it looks like this will be coming to a close. 

Slowdown of WeWork’s office expansion

It is anticipated that there is going to be a huge slowdown in the amount of space that WeWork will be looking to acquire, after a number of setbacks in recent months.

A few months ago, the co-working space giant experienced a failed IPO. This then triggered the firing of Adam Neumann, who was its chief executive, which has had some repercussions as a result. It has raised concerns about a potential cash crunch.

For example, at least two landlords of large office spaces of WeWork in the capital have told the Financial Times that they would not be signing any new leases for the foreseeable future. Furthermore, these landlords stated that contingency plans were being put together for the current WeWork spaces if a restructuring is required at some point soon.

Downgrade of shared office giants WeWork’s writing

The slowdown in expansion of WeWork office location, despite its meteoric rise also comes shortly after the rating agency, Fitch, had decided to downgrade the credit rating of the co-working company to a CCC+ rating. To experts in the field, this appears to be a level that means the potential for the business to end up defaulting is very possible if it is completely unable to restructure itself in a successful manner.

How much office space does WeWork currently have?

Up until now, WeWork has a staggering 4.1 million square feet of offices in London, according to date collected by the provider CosTAR , alongside a whooping 7.7 million square feet of office space in New York City, this makes it the largest private tenant in both cities. Other important locations for WeWork when it comes to space include Shanghai, Bangalore and San Francisco.

What does this mean for landlords?

Unfortunately, the concerns over WeWork’s future means that there is a lot of risk involved for landlords who have rented office space to the co-working space behemoth. The current total amount of rent due from the business across the life of its leases currently intact is over $47 billion dollars in data taken from the company’s filings. What’s more, according to academics at Harvard Business School, there is $2.3 billion worth of lease and other monetary obligations that will be due next year.

As it stands, two sales with WeWork as the tenant, with both locations being  in London have gone under since the news of its IPO being pulled. This includes the sale of Southbank Place which was worth over £850 million.

Pilcher London
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